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>> Obama Signs Tax Deal with Estate Tax that Favors the Rich

Dec. 17, 2010

After a contentious battle between President Obama and Senate Republicans, a deal was struck to extend all of the Bush tax cuts for two years. Included in the package was the reinstatement of the estate tax, but rather than extending it at 2009 levels, the president ceded to Republicans a lower rate and much higher exemption levels.

Final action came late yesterday when the House voted 277-148 to pass the $858 billion package, sending it to the White House. Before the final vote, lawmakers defeated an amendment offered by some Democrats opposed to a Republican- backed estate-tax proposal they said favored the wealthy. Obama had lobbied wavering House lawmakers by telephone for much of the week, Bill Burton, a White House spokesman, said.

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Under the plan negotiated with Obama, the estate tax next year would have a top rate of 35 percent to be applied after an exemption of $5 million per person. House Speaker Nancy Pelosi of California, who will become minority leader in January and wasn't part of final negotiations on the measure, said she was troubled by the cost of the agreement, especially for the estate tax breaks.

Many House Democrats favored a top estate tax rate of 45 percent with a $3.5 million per person tax-free allowance.

President Obama's tax cut deal with congressional Republicans, if enacted by Congress, will achieve what President George W. Bush could not get done: create a path to effectively kill the estate tax.

Some elements of the "compromise" reached Dec. 6 that would extend the expiring Bush tax cuts are well worth the increase in the federal budget deficit, as they help struggling families cope with the worst economy since the Great Depression while simultaneously providing a boost to the economy. At the top of this list are the 13-month extension for unemployment insurance benefits and a two percent cut in the payroll tax for employees for all of 2011. Indeed, the nonpartisan Congressional Budget Office (CBO) estimates these two policies could provide up to $1.90 and $0.90, respectively, in additional economic activity for every budgetary dollar put into them. Similarly, extensions of a more generous child tax credit and the Earned Income Tax Credit – also part of the tax cut deal – are much-needed pocketbook buffers that help the economy.

AFET has sent a letter to the Senate asking senators to co-sponsor the "Responsible Estate Tax Act." Signed by more than 70 organizations, the letter asks Senators to back strengthening the estate tax not only to promote equity in the tax code, but also to provided revenue to save teacher jobs, provide access to college, finance critical health care research, help struggling families, repair the nation's infrastructure, or to reduce the continuing deficit.

Sen. Bernie Sanders (I-VT), along with Sens. Tom Harkin (D-IA) and Sheldon Whitehouse (D-RI) as co-sponsors, have introduced the "Responsible Estate Tax Act." While the bill would essentially reinstate the estate tax at 2009 levels  exempting the first $3.5 million of an individual's estate ($7 million for couples)  it has a more progressive tax rate structure that targets the wealthiest one quarter of one percent of the population, and protects small businesses and family farms.

In a "Dear Colleague" letter sent around yesterday in search of more co-sponsors, the senators pointed out the merits of the bill. The federal government will tax the value of an estate between $3.5 million and $10 million at a 45 percent rate  the same as 2009  but will tax the value of an estate above $10 million at a 50 percent rate, and any value above $50 million at a 55 percent rate.

There is also a "Billionaire's Surtax" that adds 10 percent on top of the 55 percent rate on the value of any estate worth more than $500 million ($1 billion for couples). Additionally, the legislation would close all of the estate and gift tax loopholes singled out by the administration in their FY 2011 budget request.

In an effort to bring Democratic senators from the West back on to the majority's estate tax push, the bill includes carve-outs for farmers and large land-owning ranchers by upping the monetary limit of farmland reevaluation from $1 million to $3 million. As the "Dear Colleague" letter points out, only 80 small businesses and farms paid an estate tax in 2009, representing 0.003 percent of all estates, and this legislation would reduce that number even further.

Importantly, all of these provisions would be retroactive. Meaning the federal government would be able to recover the $14.8 billion the Joint Committee on Taxation has projected it will lose this year because of the absence of an estate tax.

>> Americans for a Fair Estate Tax Announce Statement of Principles

Feb. 26, 2010

On Tuesday, Americans for a Fair Estate Tax (AFET), a diverse coalition of public interest groups that OMB Watch is a part of and that champion a strong estate tax, adopted a new statement of principles on the tax. We argue that with both a dire need for the government to increase investment in basic public services and a credible long-term deficit problem looming, this is no time for Congress to grant further financial relief to the country's wealthiest citizens by reducing the estate tax.

In the document, Americans for a Fair Estate Tax further maintains that the estate tax provides a needed check on the concentration of wealth and power in this country while ensuring that those families who have benefited the most from publically provided goods pay their fair share to maintain them.

With this in mind, AFET calls on Congress and the President to take the following steps:

Exempt no more than the first $2 million ($4 million for married couples) of assets in an estate.

Set a tax rate of no less than 45 percent for the taxable portion of estates, with an additional 10 percent tax on the taxable portion exceeding $10 million.

Restore a credit for state estate and inheritance taxes.

Simplify the estate tax by reunifying the gift and estate tax, and allow for portability of estate tax exemptions between spouses.

As expected, the House brought up the Pomeroy estate tax bill this afternoon, and the legislation passed by a narrow score of 225 to 200. The bill passed mainly along partisan lines, but 26 Democrats joined the Republican caucus in opposition to the measure. Nine House members did not vote. With passage by the House, the bill now has to make it through the gauntlet that is the Senate.

Some senators have made public grumblings about aspects of the Pomeroy legislation. Sens. Max Baucus (D-MT) and Kent Conrad (D-ND), chairs of the Senate Finance and Budget Committees respectively, seem to approve of extension of the 2009 estate tax, but argue that Congress should index the tax for inflation, something the Pomeroy bill does not do.

Making matters worse, with health care monopolizing the Senate's time, legislators are working with a very small window to bring an estate tax bill to the floor, debate it and pass it. Any legislation similar to the Pomeroy bill brought to the Senate floor will also be more vulnerable to amendments seeking to weaken the estate tax further. While the House averted disaster by bypassing a competing estate tax proposal introduced by Shelly Berkley (D-NV), which essentially was an even bigger giveaway to the rich than the Pomeroy bill, the Senate may not be so lucky.

Back in March, when the Senate passed its budget resolution to begin the FY 2010 appropriations process, senatorial opponents of the estate tax won a small battle by adopting an amendment by Sens. Blanche Lincoln (D-AR) and Jon Kyle (R-AZ) that reduced the estate tax to a $10 million exemption per couple at a 35 percent rate. Later, conferees meeting to reconcile House and Senate versions of the budget resolution stripped the provision out, but the danger of the Senate passing similar legislation again is still there.

The argument to eviscerate the estate tax in regard to helping farms and small businesses is ridiculous, and plenty of analyses (in fact, two just came out this week) from respected think tanks and policy houses have shown that reducing the estate tax beyond 2009 levels or repealing it would only help the richest 0.2 percent of Americans and have no effect on the transfer of farms or small businesses.

===============================Americans For a Fair Estate Tax is a large coalition of
nonprofit organizations and others from around the country representing a wide cross-section of America. The coalition
is non-partisan and made up of civic, labor, social justice, faith-based, and environmental nonprofit organizations,
as well as organizations providing human services. The coalition is dedicated to preserving the estate tax in some form
as a valuable part of the progressive U.S. tax system.